Redbox Owner Outerwall Rises on $350 Million Buyback Plan

Feb. 6 (Bloomberg) -- Outerwall Inc., owner of the Redbox
DVD dispensers, rose as much as 11 percent in extended trading
after saying it will buy back $350 million of its stock.

The company, based in Bellevue, Washington, rose as high as
$70.50 after the announcement, which was accompanied by fourth-quarter results and a series of management changes, including
the appointment of a former Warner Bros. executive as president
of Redbox. The stock gained 0.7 percent to $63.64 at the close
in New York.

Outerwall said it will begin a tender offer for its shares
tomorrow. That would come on top of the $195 million in stock
repurchased last year and represents about 22 percent of the
total outstanding shares, based on the company’s current market
value of $1.62 billion.

The company, under pressure from activist investor Jana
Partners LLC to generate more value for shareholders, has said
it will return 75 percent to 100 percent of annual free cash
flow to investors which in the near term would be in the form of
share repurchases.

“They’re buying back a lot of their stock, and come
tomorrow, you’re going to see huge demand for their shares,”
said Michael Pachter, an analyst at Wedbush Securities in Los
Angeles. “You don’t have many companies with more than 20
percent of their shares being available for buyback in such a
short period,” said Pachter, who has an outperform rating on
the stock, the equivalent of buy.

Outerwall also said today that Mark Horak, most recently
president of the Americas at Warner Bros. Home Entertainment,
will become president of Redbox on March 17. Jana disclosed a
13.5 percent stake in Outerwall on Oct. 4, saying the company is
undervalued and it intends to seek a sale of some or all of its
businesses.

Business Exits

In December, Outerwall exited its Rubi coffee, Crisp Market
and Star Studio ventures, it said today, taking a $29.5 million
charge in the quarter.

The company, which also operates the Coinstar change-counting machines, said James H. Gaherity will become president
of that division, succeeding Mike Skinner, who is leaving. Maria
Stipp, who served as chief new ventures officer and interim
president of ecoATM since October, has been appointed president
of that unit.

Outerwall reported profit in the fourth quarter of $1.68 a
share, on an adjusted basis, compared with $1.01 a year earlier.
That beat the $1.24-cent average projection by analysts,
according to data compiled by Bloomberg. Sales rose 5.4 percent
to $593.7 million, trailing the $596.7 million average analyst
estimate.

Net income fell 0.9 percent to $22.7 million, or 82 cents a
share, from a year earlier.

In the quarter ending March, Outerwall forecast profit of
77 cents to 97 cents a share, on revenue of $570 million to $600
million. Analysts on average had projected $1.29 a share, on
sales of $612.1 million.